FSOC warns stablecoins remain a 'potential risk' to financial stability

Stablecoins' lack of solid risk management standards exposes them to ongoing risks that could also put financial stability in danger, according to the United States Financial Services Oversight Council (FSOC).

“Stablecoins continue to represent a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards,” the FSOC said in its annual report published on Dec. 6.

Stablecoin market is ‘heavily concentrated’
In line with the council’s views over recent years, the FSOC pointed out that the stablecoin market is “heavily concentrated, with a single firm holding around 70 percent of the sector’s total market value.”

The total stablecoin market capitalization is $205.48 billion, yet Tether
USDT
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$1.00
accounts for roughly 66.3% of that with a $136.8 billion market cap at the time of publication, according to CoinMarketCap data.

Although the FSOC did not specify any particular firm, it warned that if “that firm’s” market dominance continues to expand, “its failure could disrupt the crypto-asset market and create knock-on effects for the traditional financial system.”